Tag Archives: Estate

Safe Investing in Real Estate

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Investing is about making your money work for you.  For many of you the latter part of 2008 and the first five and a half months of 2009 have seen you trying to salvage the funds that you worked so hard to get rather than building your wealth.

 

Many people in the financial sector have undoubtedly been telling you not to panic. The economy is cyclical. It will recover and over time you will get the money back that you have lost. Look at the charts and graphs. They don’t lie. There have always been high and low cycles and recovery has always occurred. Holding the line probably will get you back to where you were. However, what is going to move you ahead and help you get to where you should have been through the months lost to the recession and recovery?

 

Loyalty to one’s financial planner, broker or banker is admirable. However, what would you do if you had a job where every payday your employer was to tell you he couldn’t pay you and then asked you to keep on working on the hope that someday you will get all of the money that is owed to you for the work completed? You need to be able to stay in your comfort zone and therefore you need to be proactive whether it is with your job or your investments. Working for someone who doesn’t pay you or having investments that are losing money is not acceptable, especially when there are safe alternatives available.

 

The corrective action for the employment issue is easy. You change employers. However, the alternatives for the investment issue may not be as easy. What is a safe investment? The best way to illustrate the answer is through an example:

 

You purchase a revenue property and pay cash for it. You find a tenant who you know will take care of the property, has an excellent income and who will sign a long term lease. You do your due diligence and find that the tenant is financially strong and has an impeccable character. The client moves in and you collect the rent. Because you have no mortgage and the tenant pays the utilities, taxes, and general upkeep of the property you are able to put the net rent in the bank and then use it to invest again and again compounding your return.

 

Is there risk in the above investment? All investments carry some risk. The strength of the tenant in the above example suggests the risk will be minimal. However, not all people can afford to purchase a revenue property and pay cash for it.

 

What is the alternative? Consider the following:

 

You have $1,000 cash each month that basically will be spent and you will have nothing to show for it. You have an RRSP secured by mutual funds totaling $39,000 down from original $50,000. You have been dealing with the same financial planner for years and he is a friend you don’t want to upset. Your total $40,000 is not sufficient to purchase a revenue property free and clear.

 

This situation presents a few issues that you have to deal with:

1)      How can you invest in safe real estate when you don’t have enough to buy a property outright?

2)      How much of the $1,000/mo. do you want to put to work for you?

3)      How much of the $39,000 should you move to a self directed RRSP and invest in real estate?

4)      How do you invest in something that your financial planner does not offer and still retain his goodwill and friendship?

5)      How do you find an investment you can get out of if you need your money?

 

The answers for safe investing in this case are simple:

1)      Investing in property has been made easy by syndicators. An investor joins a group of like-minded investors who want to own real estate that has no mortgage. Jointly they have enough money to make the purchase. A debt free private mutual fund trust accomplishes this goal and can have entry levels as low as $1,000. The group owns the building. The tenants pay basic rent and operating expenses with the remaining funds becoming the investors return. The syndicator completes the due diligence and reports to the investors. The challenge may be in finding the right syndicator. The degree of transparency that the syndicator offers will help you make that choice.

2)      The portion of the $1,000 you want to put to work for you is your personal choice. You may not want to give up any of the funds as they represent a lifestyle you want to maintain or you may want to make the full amount productive now which will allow you to spend more in the future. A few private mutual funds allow you to make monthly contributions to your account. It may be as low as $100. Surprisingly,  $100 per month will compound relatively quickly.

3)      There are people in the financial sector who will tell you to invest the whole amount into their investment product. However common sense should tell you that spreading the risk is a wiser choice. Some so called experts suggest that 25% of your investment dollars should be working for you in real estate. Who came up with 25% is anybody’s guess. You should look at your investment portfolio and determine which investments have performed the worst. Those are the ones that you must deal with first. “Stop the bleeding!” Then you should look at the remaining investments and compare their returns to what you will make from receiving your share of the rent in the building your group is purchasing. You may want to move more dollars into that project or perhaps the next building being purchased.

4)      True friendship should never stand in the way of business and investing should be treated like a business. In your review of your existing investments choose the ones that are giving you the best returns and keep them. Your financial planner will appreciate your confidence in his products and will understand your need to move losing funds to something which generates a positive return.

5)      Getting out of an investment in times of need is essential. Many investment companies have penalties if you want to take your funds out of their investment. Be careful when you are investing. Ask about exit strategies and costs for early exit. The bottom line is that it is your money and you should be able to take it back when you need it. However if you do not deal with this issue up front you may have a problem down the road.

 

Investing safely hasn’t changed over the years. Real estate has made many millionaires and will continue to do so. Recession creates fear. Fear leads to bad decisions. You should never have to play catch up with your investments. You must manage those investments intelligently in both good and bad times. Sitting doing nothing is the worst thing you can do. Making your earnings earn more is the key to becoming wealthy. Recovering what you have lost is really a step backwards.  Consider investing in real estate. Keep moving forward.

How to Attract Private Money Lenders For Real Estate Investing

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In the current real estate market, it is becoming more and more difficult to get financing for real estate investing deals.

For this reason, attracting private money is has become more important than ever before. This article gives you a few pointers you can use to attract private money to finance your real estate investing deals.

Depending on getting a mortgage for your real estate investing deals has become a tight game. Fannie Mae and Freddie Mac will not lend for real estate investing deals.

Even hard money has become tough to get. If you do get a hard money loan, you could end up paying as much as 25% in interest and points.

It is therefore more important than ever before to attract private money lenders or investors. In some cases, only one private money investor is enough for your deals, sometimes you need more than one.

So how do you attract private money investors?

1) Get a good real estate investing website

The first private money investor I had found me on the internet through my private money real estate investor website.

A good real estate investor website tells your story for you and convinces potential private money investors that their money is safe when invested in your deals.

Before they even get to talk to you, they already know most of the details they need to lend you money. They know how you work, and what remains is presenting your deals as you get them.

And when you present yourself to them in person or hand out business cards, your website becomes the most important presentation kit to potential private money lenders.

A good real estate investing website is recommended at the foot of this article.

2) Group presentations

Depending on your comfort level, you can do group presentations to several potential private money lenders. This can get you several private money investors at once and can be a very powerful way of attracting private money.

3) One on one presentations

Chances are that you must meet all your private money lenders. A one on one meeting is easy to organize and manage. I’d recommend you meet in a restaurant for a meal or breakfast where you present your program’s details and benefits.

This keeps the presentation less formal and intimidating as compared to a group of people.

4) Word of mouth

If you are doing many deals and find that you need more private money lenders, your existing private money lenders probably know friends they can recommend to you.

Whenever someone accepts to become a private money lender, you ask them how much money they have to invest in your deals. You can therefore tell if you will need to look for more private money lenders, or if only one will be enough for you.

Do not hesitate to ask if they have friends they can recommend who would like to invest their money in real estate.

5) Existing private money lenders

As long as your existing private money lenders are getting a good return on their investment, chances are they will be more than happy to invest in more of your real estate investing deals.

Do not hesitate to present more real estate investing deals as they become available; you might not need to look for more private money investors.

How To Avoid 10 Most Common Real Estate Investing Mistakes

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A lot of real estate investors fail in their real estate investing business because of common mistakes they can easily avoid.

We cover the most common real estate investing mistakes in this article.

1) Adopting too many business models
This is commonly done after attending seminars and boot camps. It is important to learn all the real estate investing strategies, but you cannot adopt all of them at the same time.

The end result is loss of focus, and few to no deals done. Take one or two business models such as wholesaling, lease options, etc and stick with it.

You can handle more when you increase your capacity.

If you are new to real estate investing, you must pick one business model at a time, polish it, then take more business models with time.

It is impossible to target your advertising when you have too many business models. When you try to reach everyone with blind marketing, it is likely you will reach nobody.

When the leads start responding, you are likely to lose most of them in the resulting chaos.

2) Having no exit strategy
The first thing to consider before you buy any property is how it will make you money. Unless you do this, you are likely to lose money.

The exit strategy is the one that determines how you structure the deal for most profits. If you have no exit strategy before you buy, you are likely to adopt the wrong strategy and lose money.

3) Paralysis of analysis
As much as we need to be careful, you can never be 100% careful. Most real estate investors have little time for anything else because they spend too much time agonizing about little details.

not all deals can work no matter how many strategies you know.

4) Not telling it like it is
This will land you in trouble real quick. You must let the seller or buyer know exactly what to expect.

This is especially important when you wholesale properties or take them subject to the existing mortgage.

5) Doing it all yourself
Let professionals do their job even though you have to save money. Treat real estate investing as a business. You cannot be the closing agent, attorney, contractor, etc.

Work on growing your business – leave the rest to professionals.

6) Doing sloppy work
Most common when you do it all yourself or when trying to save money. A house with sloppy repair work is unlikely to attract buyers and will end up making you a loss instead.

7) Being personally attached
Finally you have got this beautiful house, you love – so what? The minute you get personally attached, you spend too much money and make a loss.

Treat each deal like a number – a dollar figure; and you will be fine.

8) Not networking with other investors
I have met lots of real estate investors with properties under water, but they still think they know it all. They think teachers are liars – instead they should be out doing deals.

When you network with other real estate investors, you learn what works on the ground, what they do, how they do it, etc. They are engaged on the ground doing what you do and the know how to do it. You can learn a lot from them.

9) Not having a dream team
Build a team of people who deliver the services you need – title company, attorney, contractors, roofers, plumbers, real estate agents, mortgage brokers, etc. When you need them they are just a phone call away.

10) Not assessing yourself
For every deal that I do, I like to go back and check what I could have done better. This ensures you improve every time when you handle your next deal.
Your real estate investing business will continue growing when you do not repeat mistakes you made in the past.

Real Estate Investing: How To Keep Away From Risks

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If the real estate investing becomes completely risk free then each person will be a millionaire, because there will not be any reason not to invest in this sector. However, it is not possible because such kinds of ventures work on the risk and return policy. There are only some investors that will be beneficial in real estate investing because they are not getting scared about any risk. They are able to find out various ways to deal with such threaten possibilities. If you think that you are one of them, in that case you should spend some time to do investigation about the risks involved with real estate deal.

Time Restrictions

There are some types of projects like distressed properties and rehab houses require extra time than others. Furthermore, some other varieties of ventures need that you should be available throughout the business hours on regular basis. When you have the most important profession that needs your time, you may find that it is not easy to make time for investing in real estate.

You have to figure out the time that is required with the various kinds of property investments so that you will be able to manage your schedule nearby the ideal real estate investing deal.

Source of financial support

You have to work out on the budget plan because financial support is one of the main barriers of investing in real estate. Even though you are able to spend in property without using your own money, however you have to get fund from somewhere else.

Find out various strategies on how to utilize other people’s money in favor of real estate investing. There are several creative techniques of getting the money that you want to close a business deal. You have to think properly about each & everything that you want to do towards real estate deal.

Chances for negative funds flow

Similar like other investments, there are many possibilities to meet with losses while planning to trade in the real estate sector. If anytime you quit from a contract with a lesser amount of money that you started with, you have made a negative cash flow.
If you left with a surplus of negative fund flow deal, then it will leave you bankrupt. It is very important for you to recognize how to find better real estate investing contacts, so that you have the capacity to cooperate in order to work out with the contact in your support.

Exit Tactics

You must have the tactics of go out, because if you do not have such exit tactics then your fund is occupied and jammed in an investment property for months and even for years. If you think that it is a good to hang a property for long time then no worries, but it is not something by which you can get frequent profit.

Real Estate Investing Program For A Successful Career

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Are you passionate to make your livelihood as a real estate investor? If so, then your career and your financial future will highly rely on your understanding towards real estate investing. Skills that you possess, your knowledge and actions towards it will make your living in a better form. If you are looking to shift your career or willing to build up your career into this field you must continue reading this so as to gain more knowledge.

In real estate investing, there are countless investors who believe that it is easy to make wealth as an investor of real estate. Yes, it can be easy, but not always. Properties market all over the world will thrive to change every now and then. Hence for this reason guarantee is not offered to any investor. Thus it is advisable for you to familiarize yourself with the concepts that are linked to investing in properties.

To turn into a successful real estate investor, you are required to know ins and outs of this particular real estate market. This is important as for the simple reason that it will help you to make profit out of investments that are made in properties.

Questions and doubts

Now you will be wondering, that how one can get familiarize themselves and learn in and outs of real estate investing. You will be thinking that from where you are required to collect the concepts and information that are linked to the properties market and many more similar questions will be running in your mind. For all your questions and doubts there is one simple answer get yourself pampered in real estate investing program or educate yourself.

Now you will be wondering that which approach will be best suited for you. Before going with any of the option there are various points that are supposed to be taken into consideration. Intend success is first and foremost point for your bright career. As an investor you would surely desire to make profits as much as you can. To make profits is the main aim for any business organization except nonprofit business organizations. If you are serious towards the career in real estate investing then to take up the course will be the right option. The more knowledge you possess the more successful you are.

The content of the course will come in many different modules and structures. The structure of the course is designed based on beginners and advanced learners or investors. You can take up the course either in online or you can go with the option of class room training.

Such programs are run by none other than the successful investors. As they encompass years of experience in real estate investing it is of sure that they hold more amount of knowledge and understanding in the field of properties and its related issues. Taking up the course will enhance your knowledge and it will help you to get rid from the common mistakes that most of the investors make.

How to Know if a Real Estate Investment is Worth Investing?

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Kicking off the evaluation process is the toughest for us. Question after question kept popping up “Is the property market low enough?”, “Is this property worth considering?”, “Are the numbers the only criteria for investment?” What are we really looking for in real estate investing?? Quick bucks $$ or Regular income…

Bottom-line = Money!!!

Property Agents have tons of recommendations for YOU! How will you know whether they are good investment for you?

There are many factors that need to be considered in evaluating a real estate investment. For example, location, environment/neighborhood, facilities, financing options, rental income, etc. If all above works, it is time calling your agents and set up appointments. Happy Viewings!!!!

Actually it is not difficult and it does not need much of your time to know if a real estate investment is worth investing in the first place. All you need is crunching some numbers with your calculator, and Bingo! You can decide whether the property is worth investing.

Later in this article, we will show you how these numbers work in your prospective real estate investment by two real life cases in Johor Bahru, Malaysia.

Numbering GAME
Numbers, numbers and numbers.. How do you get them?

You may try calling a few property agents, check with banks on properties valuations and of course there is plenty of information on the Internet. Once you have these numbers you can determine if a real estate investment is worth spending your time for a viewing. “Seeing is Believing.” Check out the property to see the actual condition and the environment, whether it is to your liking once you get your numbers RIGHT! Once you get your numbers, you will see:

Incomes
One-time income – selling price
Regular income – rental price

Costs
One-time expenses (startup costs) – down payment, agent’s brokerage, legal fees, stamp duty, furnishing cost, etc.
Regular expenses (monthly costs) – monthly loan repayment, monthly maintenance fee, quit rent, property tax, etc.

See how they (numbers) work..
The basic requirement for a good real estate investment is that the income it generates must be more than its costs.

If the selling price of a real estate investment is more than its purchase price and startup costs, this investment generates capital gain.

If the rental income of a real estate investment is more than its monthly expenses, this investment generates cash flow.

If you are looking for capital gain, the gain or loss depends very much on the real estate market. Hoping to make money from capital gain on real estate is like buying a product and hoping the value of the product will go up with time. On a long term basis, real estate will be appreciating in value because of inflation, but the gain is not guaranteed.

On the other hand, a real estate investment that generates cash flow effectively put money into your pocket every month, while your equity in the real estate investment increases over time. This is the real estate investment that we are looking for – an investment worth investing.

Too good to be true?
With this recession time, you will ask yourself, “Is it the RIGHT time for me to start investing in real estate? Everything is so uncertain NOW.”

In Johor Bahru, you can find plenty of real estate investments worth investing at this juncture. We discovered most of these investments that generate substantial cash flow are mainly apartments or condominiums. You can read from our upcoming article to know why apartments or condominiums are better real estate investments in Johor Bahru. Here are two recent real life cases of real estate investments worth investing in Johor Bahru.

Case 1: We found a condominium in Larkin area of Johor Bahru in Octorber 2008 selling at $160,000 with existing tenant. Monthly rental income is $1400 while monthly maintenance cost is around $300 (maintenance fee plus sinking fund plus quit rent).

If we finance 90% of the purchase price to buy this condominium with interest rate 4.85% with a tenure of 30 years, monthly loan repayment is estimated to be $760. Thus, this condominium is generating a net cash flow of $340 every month, $4080 every year.

Total capital outlay for this investment is $24,000 for down payment including other startup costs like legal fee and brokerage.

Effectively this investment gives us a yearly cash-on-cash return of 18.5%. In other words, within 6 years we would be able to take back our capital $24,000! The best thing is we still own the condominium. It will keep putting money into our pocket every month. We also have the option to sell it away when the market is good.

Case 2: There is a 3-rooms apartment in Tampoi sold at $125,000 in Octorber 2008. Monthly maintenance cost is about $150. If we finance 90% of the purchase price with interest rate 4.85% with a tenure of 30 years, monthly loan repayment is estimated to be $600.

Expected rental income for a fully furnished apartment in the area is about $1200. With furnishing cost of $10,000, total capital required for this investment is around $27,000, while total monthly cost is $750.

The apartment is expected to generate a net cash flow of $450 every month, $5400 every year. Cash-on-cash return on this investment is 20% which we can expect to take back all the capital within 5 years.

Sound interesting right?
Of course, so far we are only talking about numbers. A good real estate investment does not rely on purely numbers. You still have to go and have a look at the building structures, study the location and neighborhood, and perform other checks before you make your decision. What we have discussed, however, can save you time and give you more ideas on the potential returns of a real estate investment before you tell your agent which real estate you want to view in the coming weekend.

 

Read more about real estate investment tips at http://reijb.com

We write regularly about real estate investment. Some of our featured articles include:

“How to estimate the value of a property?“

“Why apartment can be the best real estate investment?“

“How important is location to an investment real estate?“